A swap agreement enables you to lock in future prices for a specific time period. Maximum price agreements are optimal if you would like to set up a ‘price ceiling’ against a volatile market. A combination of a call and a put option, collars are designed to hedge your fuel’s exposure by locking prices into a certain range. We are able to provide a bespoke risk management strategy tailored to your needs and requirements. This may include a swap, cap, collar and / or even a three-way option; whichever is the best solution for your budgeting. Fixed Forward Price (Swaps)
Advantages
Customer is able to protect the potential price risk in future, with flexibility in physical supply.
No upfront premium
Good for budgetingDisadvantages
There may be opportunity costs if the market price falls below the Swap Price.
As Swap is not integrated with physical supply, the Customer may face basis risk.Maximum Price Agreements (Caps)
Advantages
Customer is able to protect the potential price risk in future, while allowing for downside benefit if prices fall.
Customer receives money if actual price exceeds cap priceDisadvantages
Requires upfront premium costs.
As Cap is not integrated with physical supply, the Customer may face basis risk.Fixed Forward Collar (Collars)
Advantages
No upfront premium required.
No payments required if prices remain within the band, or ‘Collar’.
Customer is able to protect the potential price risk in future, against rising market with certain put level.
Customer receives money if actual price exceeds ceiling price.Disadvantages
Customer pays if actual prices falls below the floor.
There may be opportunity costs if the market price falls below the Put Level.Custom Agreements
